FASB Clarifies Implementation Date of CECL for Community Banks and Credit Unions

8/2/2018 - By Josh Strickland, CPA

The Financial Accounting Standards Board (“FASB”) has approved an amendment to the transition guidance related to the implementation of the Current Expected Credit Losses accounting standard (“CECL”) for privately held banks and credit unions.

FASB considers most privately held banks and credit unions to be nonpublic business entities, which typically have a later implementation date of new accounting standards. During the drafting and issuance of CECL, the extra year allowed for implementation by nonpublic business entities was unintentionally neglected.

FASB had previously expressed the intention to give these entities additional time to comply with the standard, given their cost structure, simplicity and business models, and this amendment is intended to address questions about the implementation date, especially with respect to the timing of any related adjustment to retained earnings

The approved amendment to the transition guidance clarifies that the effective date for nonpublic business entities would begin in the fiscal year after December 15, 2021. Any company that qualifies as a nonpublic business entity will adopt CECL and adjust their opening retained earnings balances as of January 1, 2022.

The effective date of CECL for public business entities remains in the fiscal year beginning after December 15, 2020.

About the Author | Josh Strickland, CPAJoshua is a manager in the Audit & Assurance Services Department of Saltmarsh, Cleaveland & Gund. He is also a part of the firm’s Financial Institutions Advisory Group, with particular experience providing audit services to the firm’s financial institution clients.